emily: i'm emily chang in san francisco. this is "bloomberg technology." president trump signs in order to prioritize oracles of intelligence. help thealth -- to u.s. they had of china. and inside an apple so-called black site. new report reveals the not so conditions forng the tech giants contractors. and the new york city mayor defending of the deal to bring

amazon to the big apple, but will the backlash while over? besident trump wants u.s. to a leader in artificial intelligence for years to come. he has signed an executive order to launch what he calls the american ai initiative. it comes less than a week after the president stressed that investments in cutting-edge industries in the future for the united states. our reporter covers tech corporate lobbying in -- ndc and we have this ceo and cofounder wants to secure an open and symbiotic relationship. how big a deal is this executive order? >> we will see how the impacts play out, but we are excited to see that the administration is an important

initiative. south korea has a billion dollar industry, france invested $1.8 billion. many companies in china are investing. if you look at the investment around the world, is something the u.s. should be taking note of. accelerated its investment 10 times in recent years. is it all about u.s.-china competitiveness? >> the white house declined to say it was about china, but the message was pretty clear. it is working that you're talking about these hard numbers inhina accelerating 10 times the provinces that are finding it. we don't see anything like that in this executive order. it's about making r&d funding for artificial intelligence a priority, but they don't say how much of a priority it should be and they don't appropriate action moneys. the power of the purse is congress, so we cannot totally

blame the white house for not putting money into this, but i think it is worth noting that they are not putting a lot of heart funding totals are even suggesting that -- hard funding totals or even suggesting that. to the extent that it becomes an arms race, that something that is very scary. i think we've seen in recent years that getting technology is transformative, but where there are national stakes at play, it's hard to make sure those will benefit society in a good way. making sure we set up the international dynamic so there is coordinated competition so we can coordinate on safety. the executive order does a good job of saying we do need to coordinate internationally and this is something we need to pay attention to. we don't know what magnitude yet. one and part had this to say about the comparison between the u.s. and china on ai.

take a listen. >> china is not going to surpass the u.s. for another 20 years, with or without any regulation. the u.s. is so far ahead in research. however, in implementation, china has everything it needs. there is nothing the u.s. can do that will slowdown china. so it's kind of pointless in ai to look at how to regulate it. emily: is coordinated competition really a possibility between the u.s. and china in the current environment? en: it remains to be seen how much they can really do that, given what is going on. it is interesting they are not talking about export controls or ip. that is something the u.s. used to try to constrain china on. in the escalating trade war that we have, in some ways it doesn't talk about the larger competition between the u.s. and

china for who is going to control between first century and the 22nd century of tech right now. i do think it is worth noting there is a lot less optimism that the u.s. will be dominant here in washington. to hear that china is 20 years out, that's not something you hear a lot of. you hear a lot more warnings that we are falling behind and it is time to step up and train that workforce and make those investments. emily: china is father behind on research but not implementation, is that accurate? the u.s. let in science in the 1950's-19 70's. we have 19 different native languages that people grew up speaking. we really were able to get the best people from around the world. as long as we keep doing that, the u.s. will be ahead. emily: i want to talk about importance of being -- building the workforce for ai.

listen to what one guest had to say. >> the more voices you have in the room when you're making solutions for the future, the more likely you are to find something that is compelling. the fact that study after study find that many women have completely different attitudes to privacy, data, and security, means that unless you have all those voices in the room, you're not developing for everyone. emily: it's no secret that the tech industry is very male-dominated. will we be able to get the right workforce in place to build the ai of the future and make sure that all perspectives are built into this new technology? thatr goal is to make sure artificial intelligence benefits everyone. on today's trajectory, we are not looking good on diversity,

making sure we have the right kind of people at the table. , the up to organizations whole industry is responsible to make sure we are helping to bring everyone in and educate the future workforce and stakeholders. we have programs like open night scholars were reeducate people who are just coming into the field. within three months, people can become core contributors. be looking should we for next, now that this executive order has been signed? ben: a couple of things. where is the money going to be coming from? for right now they will probably have to locate it in their budgets, which is interesting. the other thing i'm watching is where is the industry going to come from? this is the targeted funding and education. i think they would want a little

more of that, but that is another thing i will be watching. maybe a third thing will be, how do you train the workforce, not just for the folks who are doing ai in the future, but those people who will be losing their jobs when they are automated by this. emily: ben brody in washington and greg brockmann, glad to have good people working on this. thank you so much for being here. coming up, apple's fancy cupertino campus offers many butries for its employees, a smaller campus for contractors tells a different story. we will discuss the working conditions at apple's so-called black site,. this is bloomberg. ♪

apple employees

enjoy various perks at its luxurious headquarters, but not all of its workers are benefiting. just six blocks away, the iphone operator -- iphone maker operates a smaller facility for its contractors. according to workers there, the environment is far from ideal. several former contractor spoke to bloomberg, describing challenging conditions, including inadequate facilities, feelings of job insecurity. one described the conditions as dehumanizing. joshua, what exactly did you find here? inhua: it's on a place sunnyvale called hammer would avenue. they are referred to as a black site. there are several hundred employees there, mostly contract employees although there are some full-time apple employees there as well. the contractors i spoke to described a pretty unhappy work

environment. all of them said they kind of took these jobs in the hopes of may be a foot in the door at apple. that seemed very unlikely once they actually got there. instead, they work for a company which seem systems to always hold over them the idea that they may not make it through the day. there was a lot of secrecy that just made it feel weird. most people i talk to were unhappy about it. a quote from a former contractor to you, it was made pretty plain that we worked at will and they could fire us at any time. there was a culture of fear that i got infected by and probably spread. then we have a statement from will work with apex to review their management systems, including recruiting and termination protocols to ensure the terms and conditions of employment or transparent and clearly communicated to workers in advance. is apple and outlier here, or is

this a common situation for larger tech companies, many of which rely on contractors? joshua: one reason i was interested in this story is because apple is not really an outlier here. as you said, the tech industry relies heavily on contractors and has for quite some time. in different versions, contractors it all the major tech companies tell similar stories about this. they often feel like they are in a lower tier. i don't think it is something the company's necessarily dispute. they say these are not people who work for us, we basically don't know about the specifics of how they are being managed. we have contracted with the company to get the work done. the question is, how much should they be responsible if those conditions are not up to the standards they hope to maintain in the own place of work. emily: there has been some

movement among google contractors to work together as a group, to advocate for their rights. is there any sort of sense that is apple contractors might do something similar or organize? somea: there has been talk. it is hard for contractors to organize in any way. there's a lot of job insecurity, which means you cannot take many risks or do anything that will make you seem like a troublemaker. most of these people don't work at apple for very long. the contract is for 12 months. some stayed for short extensions after that. when you're going to be in a place for a year or a year and a half, you don't really have the incentive to try to improve things over the long-term. emily: tell us more about what apple is saying about the story. joshua: apple has set a couple of things. as you said, they said they

would talk to apex about how the job was presented. specifically, some practices around hiring and dismissal. they also made the point that they are not aware of some of the specifics of the complaints about the management and conditions. is a contractor, which means they are in charge of their employees. it is apple's stance that since there may have been some things that happen, it is not on us, that could happen to anybody. emily: joshua, great reporting their, good story to check out. have receivedlyft initial feedback about their confidential ipo filings. the move by the regulator puts the ball back in the company's court to submit new draft for review. each had been impacted during the partial u.s. government shutdown.

what do we know about this sec?ack from the >> we know the ball is in the court of uber and lift. it's going to be on them when they get something back from the sec, and whether they are open or closed because of the government shutdown. it will continue to affect the timing here. emily: how did the partial shutdown impact is companies? have not companies been that clear on timing. , we hadase of lyft reporting that they were targeting march and april. it seems like in the case of ly ft, they are still on track, barring any other change in strategy or a further government shutdown. there are a lot of

unknowns, including whether the government will stay open for the next few weeks. if another shutdown happens, what does it mean for uber and lyft? >> a government shutdown could delay things because the companies are waiting for feedback. but the companies have strategic questions. they have always had to make decisions about whether they are ready internally. those questions are ok to the public and they still have to make them. the government shutdown is just an additional variable situation where there are lots of questions. of when they go public, are we still looking at march-april? is the best reporting we have and i would bet on that. on the uber side, this year, they talked about the first

half. i think that is still very possible, but i think uber feels more flexibility to watch the markets and see what the situation is. lyft still wants to go out before uber and make sure some of the key metrics, that they get to define nose and not have uber cloud the whole story. i think we will see that aggressive timeline and uber is plain net a little more closer to the vest. emily: interesting. eric newcomer, thanks for joining us. hard byp, shares hit inventory concerns. next.iscuss with the ceo, this is bloomberg. ♪

sonos shares tumbled, even as results topped estimates. both remain broadly positive on the speaker company's future. this comes as the space continues to be filled with hot competition from amazon, apple, and google. to have you here in the studio. you have only been public for a couple of orders but you had your second-most operable quarter ever, yet investors were disappointed by something they heard. what is driving investment in the stock? young,: we are still a public companies so investors are still looking to see how we performed over a long time. hardware companies have not always fared so well.

other companies have not persevered over the long-term. the speaker market has exploded with competition. amazon, apple, google, some more successful than others. who do you think of as your main competitor? a lot are helping more people get into the habit of listening out loud. there have always been bluetooth speakers and those kind of things. that is for google and amazon and those players have played in time. we are the option for those who get a taste of voice assistant or a music streaming service and want to listen on something a little better. emily: is anyone company taking more shared than others? you can listen to alexa on your sonos speakers. spotify,we worked with sirius xm, apple, you name it. builtld products that are

to last for a long time and they work with all the services. you are not trapped in one ecosystem. you can always get whatever you want. that is why we are able to hit record sales last quarter. emily: amazon and google have sold a lot of speakers. that is some in choosing a specific ecosystem. patrick: that's right, but the nice thing is you're using one of those problem -- products and you want to get something for another room of the home or you want something that looks or sounds better, and that also works with apple or google. that's where sonos comes in. emily: jpmorgan thinks apple should buy sonos. patrick: we are working hard to make sure we do the right thing to consumers. emily: would you be open to a deal if an offer at itself available? patrick: we would have to look

at that and consider any offer, but i'm focused on making sure we are a successful public company for the long-term. emily: tell us what you are seeing and what is plan b? patrick: we have been in china for a long time. every component is there as well. noiseeek there was some that was incorrect about what we are doing. certainly we have had a global expansion plan for a while. a always want to be in the places where your customers are. we have always thought about taking our supply chain outside of china, not leaving china but augmenting it. we have accelerated those plans on the back of the terra noise, but that is something -- tariffs noise. we have been working on that for months. we have a lot of customers in north america and europe so we want to be geographically close to those locations. emily: have you seen any impact

as result of the trade war? patrick: we have not. we have been in a good position. emily: what would the timeline before moving to different locations? patrick: that's something we would want to be a to do late this year or early next. we had a great january. i think it got overblown, quite frankly. emily: talk about new product launches beyond speakers. patrick: we are focused on new homes in new countries. today only five countries represent 80% of our sales. job number two is new products. we been focused on the home. now we are looking inside the home. you think about auto, headphones, commercial. there are other areas with unique possibilities. we are also looking at what

services we can offer customers as well. what would be a great thing for listeners? emily: would you ever become a content provider like spotify or apple? patrick: a lot of companies are doing that very well. to do looking for things for listeners that are different from other companies are doing today. emily: thanks so much for stopping by. coming up, a better idea of how bad the numbers for apple in china were last quarter and just how far they trail their rivals. that is next. later, amazon search for a second headquarters may not be over just yet. backlash in new york a have the tech giant backing out. we will discuss. this is bloomberg. ♪

♪ emily: this is bloomberg technology global link where we joined bloomberg daybreak: australia to bring you the latest in global tech news. i'm emily chang with haidi stroud-watts and shery ahn. let's take a look at the top stories of the day. shery: self driving startup neuro has raised $940 million in financing from the softbank vision fund. the tech uses unmanned road vehicles to run errands lick picking up groceries -- like picking up groceries. the startup has raised more than $1 billion from investors including softbank. eu member states are considering a joint response against the

chinese state link hacker group after a u.k. official presented evidence over alleged cyber attack by the group known as atp 10. details of the attack are classified but the u.k. is related to u.s. government indictments against the hackers. accuses them of an espionage campaign. we have a clear indication of how the global smartphone affected apple including china. iphone shipments plummeted an estimated 20% in the fourth quarter of 2018. contrast that to the domestic chinese market, dropping nearly 10% in the same time. that is according to a research firm. apple's local rival huawei saw smartphones surge 23% in the same quarter. those are the top global tech stories we are watching. emily: thank you. i want to stick with apple's iphone woes in china and bring in mark gurman in l.a.

interesting trend. not only did apple fall sharply, but we saw xiaomi fall sharply at the same time huawei rose. what is driving these conflicting trends? mark: the most important thing to know is the overall market shrank by 10% year-over-year in this fourth quarter in china. apple shrank 20%, double. xiaomi falling more than 35%. then we have huawei raising up to 23%. pretty significant. apple was obviously hit. we knew this was going to happen. huawei, a few reasons. their devices, always coming up with new ones. touting the tech specs. those are pushing their sales. this could have been worse if you look at xiaomi's 35% number. haidi: is this a china slowdown

story? a story about the reticence of the chinese consumers to spend the big bucks for the most expensive phones? or is it a cyclical story for apple? mark: i think it is a combination of the last two. one, people are holding onto their phones for longer but that is because of point b, the phones are getting more expensive. people don't want to pay between $1000, $1200 on an annual basis to upgrade their phones, especially if they are not major, new innovations. the leap from the 10 to 10s was pretty small, but from the iphone 7 to the iphone x in 2017, when they did increase the price, was actually a pretty big leap. one of the biggest year-over-year overhauls in history so that price jump did make sense. going from the 10 to 10 make it more difficults for people to pay. emily: what about the

speculation that this could be a sentiment issue tied to the u.s.-china trade war? bank of america speculated about that happening. a boycott of apple products in china. it does not necessarily jive with seeing xiaomi drop as well. mark: i agree with you. i don't think the boycott is a real thing creating an impact. 20% slowdown in iphone sales because of a boycott -- maybe we could get away with claiming a boycott went away with 5%. we are talking about 20%. i think it is way more significant. to be a boycott, that is one of several factors and not one of the big ones. know: i do want to weat whether patriotic consumerism contributed. it is probably the most probably

series of the company, but smartphones remains a bright spot too. mark: we saw what is happening between the united states and canada with the huawei cfo. on the 1% to 5% impact on the boycott for apple, supposedly got, i think i would have this -- supposedly got, i think that would have -- suppose id boycot t. i don't think consumers care about those type of things. emily: what are you going to be watching through the rest of the year? these market share shifts are always so fascinating. does it give you any indication of what is happening next? is it going to get worse for apple? mark: these things come in waves. samsung, when the and as their new phon -- when they announced their new phone, we will see a spike for them. when apple comes out with the iphone 11 or whatever they choose to cameron with new camera -- whatever they choose to call it, a new camera, you

will see a new spike for apple. we have all these issues compounded by the 10 to 10s upgrade not being very significant. i look at it as one of the smallest year-over-year upgrades. it is not something that is likely to repeat anytime soon. the 2019 upgrade will be a more notable upgrade. for 2020, we are expecting and even bigger upgrade with features like a 3-d camera for a.r., 5g. 2020 is a big year for apple so they are looking for a new design for that year. i think this is more of a slip than a pattern. they are not-term, , whate to rely on china are they actually relying on in terms of services, but also in terms of other geographic opportunities? mark: i think there are big opportunities in a few markets we have not seen apple do

lately. there is south america, russia, africa, india. all of these other growing emerging markets besides china that have not been tapped. if apple feels like it has peaked in china or efforts have tapped out, there are other markets make it go after. they have talked about africa, south america, other european regions like russia and eastern europe. these are places they don't have much penetration but they can. what a look him down to is coming out with iphones geared towards those regions. you have to play with the marketing, the functionality to go after some of those markets. they will have to realize that consumers don't necessarily want to spend north of $1000 on a phone. they are using trade in programs to mitigate the lack of subsidies from carriers. bringing down the prices, basically giving up a little bit of margin here or there in favor

of volume could help the company long-term. they know this better than anyone. they have been running this thing for decades. tim cook has been there for almost 10 years. he has known this for years too. they will fix it. haidi: bloomberg's mark gurman, thank you for joining us with the latest on iphone and apple woes in china. much more ahead, so do stick with us. this is bloomberg. ♪

emily: new york city mayor bill de blasio says securing tens of thousands of amazon jobs is mission-critical, adding other cities were poised to win the coveted second headquarters. he spoke with the new york state assembly. take a listen. >> yes, there were a variety of

sites. i think it became very clear during the process that the company preferred the long island city site. obviously, that is an area that has been developing and an opportunity to develop more of the kinds of things we care about. we care about jobs for new yorkers. creating more affordable housing, fixing our infrastructure. this is a part of the city that is very important to the future of the city. but, i want to emphasize this to your question, an important one -- as i looked at this situation, one of the biggest companies on earth offering the opportunity to bring 25,000 to 40,000 jobs, this was a national competition. do i think it should be structured that way? no. if i had my druthers, it would not be cities competing with

cities. andi was at a gathering heard a very powerful point from a former mayor, senator bernie sanders, who said if we are really going to solve that problem, that requires national legislation. to stop that situation where companies can set city against city. that said, we had a real life choice to make and i think that 25,000 to 40,000 new jobs, many of them good paying, higher-level jobs that new yorkers really want -- by the way, they are available to a yorkers, whoe range of new don't have a four year degree. we want to build up our tech communities so people have jobs, suny graduates. to me, it was mission-critical this city got those jobs rather than the other cities who i thought were very well situated. very carefule a

tracking of the competition that there were several other cities poised to win and we have to strike the right balance. emily: new york city mayor bill de blasio. i want to stick with amazon in light island city. to be or not to be, and bring in andnalyst at rbc capital brad stone, who wrote the book on amazon. what is your take on all of this controversy and whether amazon is going to back out of new york? >> well, i don't think they want to. that would be a fairly big retreat. it has become a referendum, not just about the hq process. you have new york city council numbers talking about facial recognition feature and whether amazon should be selling it to governments. you have a lot of discussion about amazon not being a being a nonunion shop. it has to be uncomfortable and

not at all what jeff bezos had in mind when he bestowed the board on amazon. very uncomfortable for them. they threatened to pull back. it seems like that is a negotiating tactic but we have to see where this goes from here. emily: last time we spoke to one of thie state senators who can decide on this, state senator michael gianiaris. he had tok at what say about new york city backing out. >> this is the type of extortion by amazon that got us in this mason the first place. they think they can sit there in seattle and dictate terms and hope that governments bent to their will. it is not going to work. emily: by threatening to pull out, the senator is saying that is extortion. does this have any impact on the company? >> not really. i cannot think of another company that has 2.5 headquarters. what are we doing?

it's an odd thing to begin with. how many other companies do this? let them i checked, microsoft is in only one place, bowling only has one headquarters. the idea that amazon would have a particular economic benefit to other locales they go to come i think it is true that they have negotiating leverage. nobody is forcing new york city to do this deal. i don't think it has an impact on the company overall. i found it amusing they decided they needed to have a second headquarters in the first place. emily: dying to hear what you both think about the bezos blackmail revelation. brad, you have obviously covered amazon and jeff bezos for a long time. for many years, he gave up the expression -- impression of being a family guy, hates the spotlight, does not do interviews. since then, he has expanded into a number of different industries

and then comes out with this blog post. what do you make of this evolution? brad: there certainly is one. amazon was the thing that mark and i would talk about, and now my mom, did you hear the news about jeff bezos today? i think it is partly a virtue of how important and intertwined amazon has become an on oe in af our lives. he now has the mental of the wealthiest person in the world. and his ownership of the washington post. what i think has been pretty consistent throughout is he does want to attend on doing the right thing. it is clear this negotiation and/or extortion attempt yby ami really rubbed him the wrong way and has forced this enormous risk that is personal information might come out, because he is very passionate about journalistic values and journalistic privilege and wants to take a stand. emily: mark, could this have any

impact on the company? mark: it could if this leads to another -- a lot of distraction by senior management. yes. the reason amazon has created so much value for shareholders -- it's because of the consistency of the management team. they have done enormously impressive jobs across multiple industries. amazon succeeding in retail, cloud, advertising -- three different industries. it is never one person, but about the team he has built around him. the top 15 to 20 executives are really impressive. if something comes like this comes across and distracts senior management and jeff bezos, shareholders should be concerned. emily: this situation is complex. on the one hand, you have jeff bezos saying he does not want to inhibit any publications reporting he is committed to journalism. on the other, amazon gave this

statement, dave carney gave this statement to the wall street journal saying i did not think wall street journal tracked in drivel from supermarket tabloids. what do you make of that? brad: on the earnings call, on the media portion, one of the reporters bravely tried to ask about whether this saga what impact jeff's ownership stake. the cfo just mercilessly shot down the question. they clearly don't want to have to -- emily: but they are having to address it. brad: they are trying to have it both ways which they tried to do with the press in the past. he is a public figure. he does not want to do is invite any scrutiny, but at the same time he is offended with how ami has done about it and his deputies are clearly not comfortable talking about what has become a very public private situation. emily: meantime, business is proceeding.

amazon is buying a wi-fi router systems maker. what do you think? mark: terms not disclosed. they have a major wi-fi device in over 100 million households and that is this thing called the alexa, the family of alexa devices. if you don't have good wi-fi, you don't have good alexa. the idea that they will get more into physical devices, sure. this is the third or fourth attempt. kindles, alexa devices. they tried with the fire phone. if you want to be in the home and get more of that brand awareness -- i don't know if they are alexa devices that have led to more sales, but they lead to more brand loyalty, customer sense o satisfaction. why not? there is a clear synergy between that and these alexa devices. emily: do you see any irony or any amount of hypocrisy just

amazon's empire is expanding into all these categories. amazon does its own kind of surveillance and here you have jeff bezos talking about blackmail of a different kind. do you think there is a risk of bezos and amazon being called out for that? brad: only if they make mistakes. there have been a couple of high-profile ones. emily: they made mistakes? brad: more of alexa that turned over some of these private conversations into a contact, the apologized for it. i think they poorly understood restrictions on how they gather information on alexa devices. if those were to be found to be not secure or missing data for advertising purpose, they do open themselves up to charges of hypocrisy. as for now, i would probably not see that yet. mark: it could. it is a trade-off.

if you want more personalized services, you've got to give more information. the reason facebook ads are targeted is because there is a trade-off and you allow them to track your information. same thing with amazon. hopefully the ads and services are better because of the day that you voluntarily supplied. at some point for some people, they will cross the line. i'm sure we will be dealing with this issue for the next five years. whether they get into the facebook-like crosshairs -- facebook shuot itself in the foot. emily: a few more than a couple. mark: amazon has been pretty good at handling these kinds of issues in the past, but the more they have access to this data, there is greater risk here. brad, thank you both. can't wait for this saga to unfold. reddit users have taken to the platform to protest tencent's new investment. giant'smedia

involvement could impact free speech. this is bloomberg. ♪

reddit raised $300 million in new funding, including in investment from chinese internet giant tencent. it is valued at $3 billion but sparked a backlash from users, potential censorship. selina wang is joining us. an unlikely source of funding for a website that prides itself on free speech. what is driving this? selina: reddit is blocked in china but not too unusual for 10 stake. large stake in companies large and small. they are the largest investor in snapchat with a 15% stake. there in companies like tesla and modified -- spotify, uber. in reddit, it makes sense when you look at tencent's gaming.

a lot of it is very popular games like fornite, clash of clans. topics that are incredibly popular among reddit users. emily: readdit did confirm the funding round but did not give us a comment on free speech issues. presumably, they don't intend to do anything different or do they? selina: a lot of users have been posted about how frustrated they are, but some users have also pointed out that tencent is an investor in a lot of other companies that have not seen changes in censorship or content since tencent invested but it is a concern. emily: it is not the chinese government, but tencent certainly follows the strict rules the chinese government has put out and sensors its own site. selina: it follows its rules within the border that it operates. it will not go meddling into

spotify or snapchat's operations abroad.it is worth pointing out, $150 million investment into reddit. a $3 billion valuation, that is a really small stake. tencent has a provision for being a passive and stable investor. reddit provides a lot of that interesting expertise and have become a juggernaut in china. emily: we will be watching those reddit threads. selina wang, thank you. that does it for this edition of bloomberg technology. we are live streaming on twitter, @technology. follow tictoc on twitter. this is bloomberg. ♪ i'm a veteran

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haidi: good morning. i'm haidi stroud-watts in sydney. shery: good evening from new york, i'm shery ahn. sophie: i'm sophie in hong kong. welcome to daybreak asia. ♪ haidi: the top stories this tuesday -- markets pivotal for global growth. the dollar strengthens again and treasuries fall. trade talks resume in beijing among cautious optimism.